U.S. businesses and government officials have complained loudly in recent years about protectionism and closed markets in China.
Mohamed El-Erian, CEO of bond management titan Pimco, says that won’t last too much longer.
China will open its markets significantly in the next two years, he says.
“We would expect them to continue to take steps toward more market-based instruments of economic management,” El-Erian recently told Bloomberg.
That includes allowing the yuan more flexibility to rise and pushing “a gradual shift from direct controls on credit to market-based control of credit,” he said.
“It’s a natural evolution of successful emerging economies. China is at the stage now where it becomes increasingly in its interest to adopt more market-based instruments.”
For years, the government has kept the renminbi artificially low to boost Chinese exports.
But an inflow of foreign investment money and speculation that the government will allow the yuan to rise have helped boost the currency by the largest amount in a year.
China will open its economy gradually, El-Erian says. “Understandably so, because if you make a mistake, it’s a very costly mistake for your population.”
Many experts are concerned that China is overheating.
“China is the engine of growth that will hopefully pull us out of the morass,” legendary short seller James Chanos said in a recent speech.
“But the closer you look at that engine, the more you see that it may throw a piston rod soon.”
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